The Indian rupee is expected to appreciate against the US dollar on Friday amid a rise in risk in equity markets. The domestic currency may rise as dollar languished after US inflation data came in cooler than expected. Today, focus will be on the GDP data from the UK and that is likely to pound that witnessed sharp against the US dollar. In the previous session, rupee depreciated against the US dollar as participants remained cautious ahead of the release of the US inflation data. A weak trend domestic equities also weighed on investor sentiments. At the interbank foreign exchange market, the local unit opened at 81.61 and finally settled at 81.77 against the greenback, registering a fall of 30 paise over its last close.
Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services
“Rupee consolidated in a narrow range ahead of the important inflation number that was released from the US. Data showed U.S. consumer prices rose less than expected in October to suggest underlying inflation is cooling. CPI rose 7.7% in October on a year-over-year basis, down from 8.2% in the prior month. The dollar fell sharply after the release of CPI data and US equities cheered as it may allow the Federal Reserve to get less aggressive with interest rate hikes. Fed funds futures priced in a drop in expectations for the U.S. central bank’s peak target rate, which fell below 5%.”
“The likelihood of a 50bps rate hike by the Fed instead of a 75bps increase in December rose to 71.5%. One of the Fed member said that monetary policy needed to become more restrictive and remain restrictive for a while to put inflation on a sustainable downward path to the U.S. central bank’s target of 2%. Major crosses were on the move after the release of US inflation data with yen gaining the most by almost 3% in the intraday session. Today, focus will be on the GDP data from the UK and that is likely to pound that witnessed sharp against the US dollar. We expect the USDINR(Spot) to trade with a negative bias and quote in the range of 80.50 and 81.50.”
Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd.
“USDINR spot closed 37 paise higher at 81.80 due to weakness in equity markets and strength in dollar index, ahead of the US CPI data, later in the evening. Over the near term we expect a range of 81.30 and 82.20 on spot.”
Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors
“The USDINR is set to open near 80.70 after the US CPI inflation came at 7.7% and core inflation came at 6.3%. The US 2-year yields fell by 20 bps and 10-year was at 3.81% as markets expected slower rate hikes by FED in its next meeting in December-22. The dollar index fell to 108.16 after yesterday’s rise to 111 levels. The pound and Euro all rose against the $. Asian currencies all rose against the $ with CNH at 7.18 against 7.28 yesterday evening. KRW rose to 1340 levels as against 1372 yesterday. IDR also was up against the dollar psychological support at 80. The range for the day is expected to be 80.25 to 81.00. Exporters who have not sold yesterday are expected to hold on to their positions and wait for better levels to sell as $ is near its support. Importers can buy this dip for all near-term and December-22 payables.”
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